1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion:
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in applying a gross profit rate of 6% onthe sales for the respective years in the case of the assessee as against the direction of the Government dated August 17, 1973, to charge a gross profit rate of 2% and while the assessee has shown the rate of 3.4% ?'
2. The material facts giving rise to this reference briefly are as follows: The assessee is a partnership firm carrying on a business in potatoes and onions as wholesale dealer. While framing assessment for the assessment years 1975-76 to 1977-78, the ITO held that the account books maintained by the assessee were unreliable. The ITO, therefore, made additions to the income disclosed by the assessee by applying a G.P. rate of 7.5% on estimated sales. On appeal by the assessee, the AAC partly allowed the appeal by reducing the G.P. rate to 6%. On further appeal before the Tribunal, the Tribunal directed the ITO to apply a G.P. rate of 6% on the declared sales of the assessee. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.
3. Shri Mehta, learned counsel for the assessee, contended that the Tribunal failed to take into consideration the provisions of the Madhya Pradesh Essential Articles (Exhibition of Prices and Price Control) Order, 1973. It was urged that in view of the provisions of the control order, the assessee could not have obtained the higher rate of profit as estimated. It was, therefore, contended that the Tribunal was not justified in applying a gross profit rate of 6% on the declared sales. The contention cannot be upheld. The Tribunal took into consideration the fact that the assessee itself had shown profit at more than 2% in some years in spite of the provisions of the Control Order providing for sale at a price not exceeding a margin of 2% for the wholesale dealers. In the circumstances of the case, therefore, the Tribunal was justified in. applying a G.P. rate of 6% on the sales for the respective years.
4. Our answer to the question referred to this court is, therefore, in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.